Mbabane: The International Monetary Fund has advised government to use part of the E7 billion windfall from the Southern African Customs Union revenue to repay domestic arrears. At the end of last September, government arrears had reached E1.5 billion; 5.3% of gross domestic product. Since then, a source revealed, the arrears have accumulated to an estimated E2.5 billion (8.8% of GDP). As at December 2010, government’s unpaid bills only amounted to E900 million, which was 3.2% of GDP.
Meanwhile, an IMF Mission to Swaziland, which was in the country from last Thursday until yesterday, said the country’s economic performance this year would critically depend on the authorities’ actions to restore fiscal sustainability. It noted that the overall fiscal deficit remained above 10% of GDP, while the lack of financing led government to accumulate a large amount of domestic arrears. Also, it said recourse to Central Bank financing reduced the gross official reserves to E4.2 billion at end-December 2011, equivalent to 2.3 months of prospective import cover.
The Mission was in the country at the request of the authorities to review the draft budget for the fiscal year 2012/13 starting April 1, 2012; assist in elaborating a strategy to improve public finance management, in collaboration with development partners; and take stock of recent developments and update the risk assessment pertaining to the financial sector.
Head of the Mission Joannes Mongardini, in a statement, said in concluding the 2011 Article IV Consultation on January 23, the IMF Executive Board called upon the country’s authorities to take urgent upfront measures, including a reduction of the wage bill and to use the windfall SACU revenue to repay domestic arrears.
“In this context, the mission advised the government to take immediate measures to reduce the wage bill by at least E300 million (1% of GDP). “Using these and other savings to launch the Enhanced Voluntary Early Retirement Scheme would help bring the wage bill in the medium term more in line with the available resources,” he said.
Majozi advised to aim for E900m budget surplus
Minister of Finance Majozi Sithole (as custodian of the national budget) has been advised to aim for a budget surplus of E919 million for the 2012/13 fiscal year. This, the International Monetary Fund (IMF) has noted, was “in order for government to repay domestic arrears and advances from the Central Bank, the 2012/13 budget should aim at an overall surplus of E 919 million (3.1% of GDP)".
The IMF advised that in addition to adjusting the size of the budget, the quality of spending should be improved, with more resources allocated to education, the fight against HIV/AIDS and, social protection for orphaned and vulnerable children and the elderly.
Meanwhile, the IMF mission welcomed government’s resolve to move forward with an ambitious reform agenda on public finance management (PFM), drawn up with assistance from IMF staff and other development partners. “Significant technical and financial assistance will be available to support the government’s implementation of the reform agenda, once it is approved by cabinet. Key priorities for 2012 include passage of the revised PFM bill, drawn up with technical assistance from IMF staff, improving budget reporting, strengthening expenditure control and enhancing budget preparation,” said Head of Mission Joannes Mongardini.
Adding, he said the financial sector in Swaziland required effective supervision. The mission called on the country’s authorities to monitor closely developments in the banking sector and to ensure that commercial banks maintain an adequate level of liquidity. It urged the authorities to move swiftly to make operational the new regulatory authority for non-bank financial institutions, while shifting the supervision of savings and credit cooperatives to the Central Bank in the interim.
“The mission would like to thank the authorities for the frank and constructive discussions,” added Mongardini.
